“Plata o Plomo?”: Bribe and Punishment in a Theory of Bad Politicians∗

We study the quality of politicians when groups attempt to exert influence on policies by using both bribes (plata, Spanish for silver and money) and the threat of punishments (plomo, Spanish for lead). Contrary to the case in which groups use only bribes (as is traditional in the literature) and more capture does not damage the equilibrium quality of politicians, in the general case where also punishments are used, more capture results in worse politicians. The use of punishments lowers the returns from public office and reduces the incentives of high ability citizens to enter public life. The existence of punishments changes the nature of the influence game, so that capture can be associated not only with distorted policies and rent seeking waste, but also with a new problem: bad quality politicians. Empirical predictions are that cheaper plomo and more resources subject to official discretion are associated with more frequent corruption and less able politicians. The model also offers a natural framework to analyze the institution of official immunity. Protecting officials from accusations of corruption will decrease the frequency of corruption if the judiciary is weak. Immunity can also increase the quality of officials, but this might be at the cost of more frequent